Letter Re: Getting First Aid Supplies Tax Free

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Hi Hugh and/or JWR-

I’ve been a long-time reader, but this is my first time responding to a post. I just wanted to clarify one point that was made in reply to the “Letter: Getting First Aid Supplies Tax Free” thread.

I am a practicing physician and a fellow patriot/prepper. I have also been self-employed for the past two years after leaving hospital employment, which is when I had to start investigating the best insurance options for me and my family. Keep in mind, I am not an accountant or IRS agent, but most of these facts can be found on the IRS website, as well as speaking with an accountant or tax professional.

If you are self-employed, or else your employer offers you a Health Savings Account (HSA), I strongly recommend looking at whether this option is right for you. HSA’s differ from FSA’s in that YOU (not your employer or the government) own the HSA account. There are also many tax advantages to an HSA. (Accountants call it “triple tax advantaged” because it is never taxed if used for anything “medical, dental, or vision”, and this definition of “medical, dental, or vision” is actually surprisingly broad.) It can be used for expenses like braces, glasses, contacts, non-covered surgeries (i.e.- LASIK) or medications, medical supplies, et cetera.

To be eligible for an HSA, you must be on a qualified High Deductible Health Plan (HDHP), but the monthly premiums for these plans are usually low enough that it more than offsets the increased deductible exposure, especially if you are healthy enough that you don’t have claims that spend through your deductible every year. HDHP/HSA’s are probably not as well-suited for folks who suffer from expensive chronic medical conditions, which cause their annual deductible to be met year after year, but it is ideal for healthy and semi-healthy families or individuals.

If an HSA is an option that is something you are interested in looking into, I recommend a few things:

  1. Set money aside in the HSA to at least match the savings in monthly premiums you would otherwise be paying on a traditional PPO/HMO style plan. This self-discipline of saving makes it easier to build up some money in the HSA for the times when big expenses happen and you have to pay that $3000 deductible out of the HSA.
  2. Use the HSA as a “pass through” for any medical/dental-related expenses, as it saves you paying for these in post-tax dollars. Things like glasses, contacts, cold medicine, vitamins, braces, should all be run through the HSA for tax savings, rather than paid for out-of-pocket.
  3. Buy your medical kit supplies through this as well. As long as it is a qualified medical expense, it is fair game to use the HSA money on.
  4. If you are given the option of where you set up your HSA account (it doesn’t have to be with the insurance company that is selling you the HDHP), shop around. Some banks and credit unions offer no-fee accounts and also pay interest. I found a wide variation in plans when I looked into setting up my family’s plan, but I found the best deal at a local credit union. It definitely pays to shop around on this one. I recommend dealing with a local bank or credit union though, as some of the Internet/phone-based companies can be very difficult to work with and have no local branch where you can get customer service.
  5. SAVE ALL OF YOUR RECEIPTS. These are essentially tax deductions you are claiming, so save your receipts in case of IRS audit.

– “Doctor Dan”

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